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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended February 29, 1996 Commission File Number 1-1520
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GenCorp Inc.
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(Exact name of registrant as specified in its charter)
Ohio 34-0244000
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(State of Incorporation) (I.R.S. Employer Identification No.)
175 Ghent Road Fairlawn, Ohio 44333-3300
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 869-4200
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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At March 31, 1996, there were 33,412,661 outstanding shares of GenCorp Inc.'s
Common Stock, par value $.10.
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GenCorp Inc.
<TABLE>
<CAPTION>
Table of Contents Page No.
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three Months Ended February 29, 1996 and February 28, 1995 -3-
Condensed Consolidated Balance Sheets -
February 29, 1996 and November 30, 1995 -4-
Condensed Consolidated Statements of Cash Flows -
Three Months Ended February 29, 1996 and February 28, 1995 -5-
Notes to the Unaudited Interim Condensed Consolidated
Financial Statements -6-
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations -11-
Part II. Other Information
Item 1. Legal Proceedings -14-
Item 4. Submission of Matters to a Vote of Security Holders -14-
Item 5. Other Information -15-
Item 6. Exhibits and Reports on Form 8-K -15-
Signatures -16-
</TABLE>
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PART I. FINANCIAL INFORMATION
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GenCorp Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Unaudited
Three Months Ended
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February 29, February 28,
1996 1995
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<S> <C> <C>
NET SALES $ 368.3 $ 428.1
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COSTS AND EXPENSES
Cost of products sold 312.3 366.7
Selling, general and administrative 45.1 44.2
Interest expense 8.0 8.7
Other (income) and expense, net (1.6) (3.1)
Unusual items (Note C) 24.8 --
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388.6 416.5
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INCOME (LOSS) BEFORE INCOME TAXES (20.3) 11.6
Income tax (benefit) provision (8.6) 4.6
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NET INCOME (LOSS) $ (11.7) $ 7.0
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EARNINGS (LOSS) PER SHARE OF COMMON STOCK (NOTE B)
Primary $ (.35) $ .22
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Fully diluted $ (.35) $ .21
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Average number of shares of common
stock outstanding (in thousands)
Primary 33,670 32,259
Fully diluted 40,828 39,417
Cash dividends paid per share of common stock $ .15 $ .15
</TABLE>
The accompanying notes to the unaudited interim
condensed consolidated financial statements are an
integral part of these statements.
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GenCorp Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
<TABLE>
<CAPTION>
Unaudited Audited
February 29, November 30,
1996 1995
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<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 15.2 $ 17.0
Accounts receivable 252.3 241.7
Inventories (Note D) 157.6 161.3
Prepaid expenses and other 49.7 45.0
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TOTAL CURRENT ASSETS 474.8 465.0
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Recoverable from U.S. government and third
parties for environmental remediation 122.4 120.8
Deferred income taxes 144.9 147.8
Prepaid pension 96.2 109.4
Investments and other assets 86.5 71.2
Property, plant and equipment:
At cost 1,095.3 1,302.2
Accumulated depreciation (670.7) (758.9)
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Net property, plant and equipment 424.6 543.3
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TOTAL ASSETS $1,349.4 $1,457.5
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LIABILITIES AND SHAREHOLDERS' EQUITY:
Notes payable $ 24.3 $ 20.7
Accounts payable - trade 64.8 98.6
Income taxes (2.1) 4.8
Other current liabilities 221.2 251.4
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TOTAL CURRENT LIABILITIES 308.2 375.5
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Long-term debt (Note E) 377.0 382.9
Postretirement benefits other than pensions 355.7 371.7
Environmental reserves 230.6 231.6
Other liabilities 60.3 60.3
Contingencies (Note F)
SHAREHOLDERS' EQUITY
Preference stock - (none outstanding) -- --
Common stock - $.10 par value; 33.4 million
shares outstanding 3.3 3.3
Other capital 22.1 21.9
Retained earnings (deficit) (14.1) 2.5
Currency translation adjustment 6.3 7.8
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TOTAL SHAREHOLDERS' EQUITY 17.6 35.5
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,349.4 $1,457.5
======== ========
</TABLE>
The accompanying notes to the unaudited interim
condensed consolidated financial statements are an
integral part of these statements.
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GenCorp Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
<TABLE>
<CAPTION>
Unaudited
Three Months Ended
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February 29, February 28,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (11.7) $ 7.0
Provision for unusual items 24.8 --
Depreciation and amortization and loss on
disposal of fixed assets 24.3 17.9
Increase in working capital (94.3) (89.1)
Increase in deferred income taxes 2.9 --
Other - net (8.8) (4.9)
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NET CASH USED IN OPERATING ACTIVITIES (62.8) (69.1)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (10.4) (11.0)
Proceeds from asset dispositions 80.3 (1.0)
Investments and other - net (.4) --
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 69.5 (12.0)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term debt incurred 3.6 14.1
Long-term debt incurred 110.0 110.1
Long-term debt paid (115.9) (43.0)
Dividends (5.0) (4.9)
Other equity transactions (1.2) 8.4
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NET CASH PROVIDED FROM OR (USED IN)
FINANCING ACTIVITIES (8.5) 84.7
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NET INCREASE OR (DECREASE) IN CASH AND EQUIVALENTS (1.8) 3.6
Cash and equivalents at beginning of year 17.0 22.4
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Cash and equivalents at end of period $ 15.2 $ 26.0
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</TABLE>
Cash paid during the period for interest was $10.8 million and $11.4 million for
the three months ended February 29, 1996 and February 28, 1995, respectively.
Cash paid during the period for income taxes was $2.9 million and $8.3 million
for the three months ended February 29, 1996 and February 28, 1995,
respectively.
The accompanying notes to the unaudited interim
condensed consolidated financial statements are an
integral part of these statements.
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GenCorp Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with the instructions to Form 10-Q
and therefore do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
These interim statements should be read in conjunction with the financial
statements and notes thereto included or incorporated by reference in the
GenCorp Inc. (Company) Annual Report on Form 10-K for the fiscal year ended
November 30, 1995.
All normal recurring accruals and adjustments considered necessary for a
fair presentation of the unaudited results for the three months ended February
29, 1996 and February 28, 1995, have been reflected. The results of operations
for the three months ended February 29, 1996, are not necessarily indicative, if
annualized, of those to be expected for the full fiscal year.
Certain reclassifications have been made to conform prior year's data to
the current presentation.
Note B - Net Income Per Share of Common Stock
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Primary earnings per share of common stock are calculated by dividing net
income by the weighted average number of common shares outstanding adjusted for
the inclusion of stock options and shares to be issued under other stock based
compensation programs. For fully diluted earnings per share, net income and
shares outstanding have also been adjusted as if the Company's $115,000,000 8%
Convertible Subordinated Debentures Due August 1, 2002 had been converted. (See
Note E for further information regarding the debentures.)
Note C - Unusual Items
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On March 1, 1996, GenCorp Inc. completed the sale of substantially all of
the assets and certain liabilities of its Reinforced Plastics Division to
Cambridge Industries, Inc. of Madison Heights, Michigan for an aggregate
consideration of approximately $42 million, of which approximately $18 million
was paid in cash at the closing, approximately $14 million of which was paid by
delivery of a Subordinated Promissory Note of Cambridge Industries Holdings,
Inc. and approximately $10 million of which was paid through the retention of
receivables. The sale was effective as of February 29, 1996.
On February 15, 1996, GenCorp Inc. completed the sale of substantially all
of the assets and certain liabilities of its Vibration Control Division to BTR
Antivibration Systems, Inc., a subsidiary of BTR plc. for an aggregate
consideration of approximately $80 million paid in cash at the closing.
The Company recognized a loss of $10 million from the sale of the two
divisions and used the proceeds to reduce outstanding debt.
Also during the first quarter of 1996, the Company took a pretax charge of
$14.8 million for expenses related to the Voluntary Early Retirement Incentive
Program for eligible employees at the Company's Fairlawn headquarters and
Corporate Technology Center.
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Note D - Inventories
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Inventories are stated at the lower of cost or market value. A portion of
the inventories is priced by use of the last-in, first-out (LIFO) method using
various dollar value pools. Interim LIFO determinations may involve management's
judgments of expected year-end inventory levels. Components of inventory are as
follows:
<TABLE>
<CAPTION>
Unaudited Audited
February 29, November 30,
1996 1995
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<S> <C> <C>
Raw materials and supplies $ 42.1 $ 46.7
Work-in-process 9.4 15.5
Finished products 63.8 64.9
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Approximate replacement cost of LIFO inventories 115.3 127.1
Reserves, primarily LIFO (41.7) (42.8)
Long-term contracts at average cost 186.5 178.5
Progress payments (102.5) (101.5)
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$ 157.6 $ 161.3
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</TABLE>
Note E - Long-term Debt and Credit Lines
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The Company has an unsecured revolving credit facility (Facility) which
expires in April 1997. The Facility, which totaled $445 million on November 30,
1995, was reduced to $384 million as of February 29, 1996 from proceeds related
to the Vibration Control divestiture. During the second quarter of 1996, the
Facility was subsequently reduced to $356 million from proceeds related to the
divestiture of the Reinforced Plastics Division. As of February 29, 1996, unused
revolving lines of credit totaled $134 million. The Company pays commitment fees
of 3/8 of one percent on the unused balance. Interest rates are variable,
primarily based on LIBOR, and are currently at an average rate of 6.4 percent.
The Facility contains various debt restrictions and provisions relating to
net worth and interest coverage ratios. The Company is required to maintain
consolidated net worth of not less than $271 million, excluding the impact of
the accounting standards adopted in 1994 and the unusual items recorded in the
fourth quarter of 1994 pursuant to an amendment to the Facility. Excluding the
impact of these items, the Company had net worth of $288 million at February 29,
1996 and was in compliance with the amended agreement.
The $115,000,000 8% Convertible Subordinated Debentures Due August 1, 2002
(Debentures) are redeemable at the option of the Company, in whole or in part,
at any time on or after August 10, 1996. The Debentures are convertible at any
time prior to maturity, unless previously redeemed, into shares of common stock
at a conversion price of $16.065 per share (equivalent to a conversion rate of
approximately 62.247 shares of Common Stock per $1,000 principal amount of
Debentures) subject to adjustment in certain circumstances. The market value of
the Debentures was $118 million at February 29, 1996.
At February 29, 1996, the Company had unsecured, uncommitted lines of
credit with several banks for short-term borrowings aggregating $46 million, of
which $19 million was outstanding. Borrowings under such lines generally bear
interest at money market rates and are payable on demand. The Company also had
outstanding letters of credit totaling $27 million at February 29, 1996.
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Note F - Contingencies
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Environmental Matters
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Sacramento, California
In June 1989, the United States District Court approved a Partial Consent
Decree (Decree) requiring Aerojet to conduct a Remedial Investigation/
Feasibility Study (RI/FS) of Aerojet's Sacramento, California site and prepare
an RI/FS report on specific environmental conditions present at the site and
alternatives available to remedy such conditions. Aerojet also is required to
pay for certain government oversight costs associated with compliance with the
Decree.
In September 1993, Aerojet reached a settlement with the U.S. government
whereby Aerojet recovered approximately $18 million for costs incurred at the
site from July 1989 through November 1992. The settlement also provides that 65
percent of covered costs incurred after November 1992, net of insurance
recoveries, will be added to the pricing of government contracts.
Aerojet has substantially completed its efforts under the Decree to
determine the nature and extent of contamination at the facility and to
identify the technologies that will likely be used to remediate the site. Based
on available facts, existing technology and current environmental laws and
regulations, Aerojet recorded a net $68 million charge in 1994 to remediate the
site. These remediation costs are principally for design, construction and
enhancement of groundwater and soil treatment facilities, ongoing project
management and regulatory oversight, and are expected to be incurred over a
period of approximately 20 years. This estimate will be subject to changes as
work progresses and additional experience is gained.
At February 29, 1996, Aerojet had a reserve of $203 million for costs to
complete the RI/FS and remediate the site and has recognized $119 million for
probable future recoveries under the 1993 settlement agreement with the U.S.
government.
Legal proceedings to obtain reimbursements of environmental costs from
insurers are continuing.
Lawrence, Massachusetts
The Company has studied remediation alternatives for its closed Lawrence,
Massachusetts facility, which was contaminated with PCBs, and has begun site
remediation and off-site disposal of debris. The Company has a reserve of $29
million for decontamination and long-term operating and maintenance costs of
this site. The reserve represents the Company's best estimate for the remaining
remediation cost. Future remediation cost could range as high as $55 million
depending on the results of future testing and the ultimate remediation
alternatives undertaken at the site. The time frame for remediation is currently
estimated to range from 4 to 8 years.
Muskegon, Michigan
The United States District Court has ruled that Aerojet and its two
inactive Cordova Chemical subsidiaries (Cordova) are liable with a former
owner/operator of a former chemical plant at the Cordova site in Muskegon,
Michigan for remediation of the site. Subsequently, the United States District
Court's decision has been appealed to the United States Court of Appeals.
Separately, the State of Michigan Court of Claims previously ruled that the
State of Michigan is obligated to indemnify Aerojet and Cordova for all
remediation and investigation costs at the site. On July 14, 1995, the Michigan
Court of Appeals affirmed the decision of the Court of Claims, and on September
20, 1995, the Michigan Court of Appeals denied the State of Michigan's motion
for a rehearing. The State has petitioned the Michigan State Supreme Court for
review.
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Note F - Contingencies (continued)
- ----------------------------------
The Company believes that most of the $50 million to $100 million in
anticipated remediation costs will be paid by the State of Michigan or the
former owner/operator and that its $14 million reserve will be adequate to cover
the Company's costs associated with this matter. Included in investments and
other assets is $9 million to be recovered from insurance companies.
San Gabriel Valley Basin, California
Aerojet, through its Azusa facility, is considered to be a potentially
responsible party (PRP) in the portion of the San Gabriel Valley Superfund Site
known as the Baldwin Park Operable Unit (BPOU). Regulatory action involves
possible regional groundwater remediation, site specific investigation and
cleanup.
Aerojet's investigation concluded that the principal groundwater
contamination is upgradient of Aerojet's property and that only low
concentrations of contaminants are present in the soils of Aerojet's presently
and historically owned properties. The EPA contends that Aerojet is one of the
four largest sources of groundwater contamination at the BPOU of the sixteen
PRPs identified by the EPA. Aerojet contests the EPA's position regarding the
source of contamination and the number of responsible PRPs.
The EPA has issued a Record of Decision requiring groundwater remediation
for the BPOU, estimated to cost $47 million in non-recurring costs and $4
million to $5 million in annual operating expense. Aerojet is participating in
an effort to develop an alternative "consensus" plan in which certain water
supply entities would integrate the remedial requirements into a water supply
project. If implemented, the consensus plan will provide federal funding and
funding from water supply entities receiving benefit from the project, thus
reducing the PRPs' costs.
Aerojet's cost exposure cannot be estimated at this time. However,
management believes, on the basis of presently available information, that
resolution of this matter will not materially affect the consolidated financial
condition of the Company. Among the factors considered by management are the
following: the number of other viable PRPs; the potential for federal funding or
cost sharing with water supply interests; Aerojet's site-specific investigation;
and the fact that, to date, Aerojet's San Gabriel Valley costs are being
recovered from the government in the pricing of Aerojet's contracts.
Additionally, Aerojet has filed suit against its insurers for recovery of such
costs.
Other Sites
The Company is also currently involved, together with other companies, in
28 other Superfund and non-superfund remediation sites. In many instances, the
Company's liability and proportionate share of costs have not been determined
largely due to uncertainties as to the nature and extent of site conditions and
the Company's involvement. While government agencies frequently claim PRPs are
jointly and severally liable at such sites, in the Company's experience, interim
and final allocations of liability costs are generally made based on relative
contributions of waste. Based on the Company's previous experience, its
allocated share has frequently been minimal, in many instances less than 1
percent. The Company has reserves of approximately $18 million as of February
29, 1996 which it believes are sufficient to cover its best estimate of its
share of the environmental remediation costs at these other sites. Also, the
Company is seeking recovery of its costs from its insurers.
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Note F - Contingencies (continued)
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Environmental Summary
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In regard to the sites discussed above, management believes, on the basis
of presently available information, that resolution of these matters will not
materially affect liquidity, capital resources or the consolidated financial
condition of the Company. The effect of resolution of these matters on results
of operations cannot be predicted due to the uncertainty concerning both the
amount and timing of future expenditures and future results of operations.
Other Legal Matters
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In August 1991, Olin Corporation (Olin) advised GenCorp that Olin believed
GenCorp to be jointly and severally liable for certain Superfund remediation
costs, estimated by Olin to be $70 million, associated with a former Olin
manufacturing facility and waste disposal sites in Ashtabula County, Ohio.
In 1993, GenCorp sought declaratory judgment in the United States District
Court for the Northern District of Ohio that the Company is not responsible for
environmental remediation costs associated with the former Olin facility and
Superfund sites. Olin counterclaimed seeking a judgment that GenCorp is jointly
and severally liable for a share of remediation costs.
In late 1995, the Court hearing on the first phase of the case relative to
the issue of joint and several liability was completed, but the Court has not
yet rendered a decision. If the Court finds GenCorp is liable, subsequent trial
phases will address allocation and damages.
The Company is vigorously litigating this matter and believes that it has
meritorious defenses to Olin's claims. While there can be no certainty regarding
the outcome of any litigation, in the opinion of management, after reviewing the
information currently available with respect to this matter and consulting with
the Company's counsel, any liability which may ultimately be incurred will not
materially affect the consolidated financial condition of the Company.
The Company and its subsidiaries are subject to various other legal
actions, governmental investigations, and proceedings relating to a wide range
of matters in addition to those discussed above. In the opinion of management,
after reviewing the information which is currently available with respect to
such matters and consulting with the Company's counsel, any liability which may
ultimately be incurred with respect to these additional matters will not
materially affect the consolidated financial condition of the Company. The
effect of resolution of these matters on results of operations cannot be
predicted because any such effect depends on both future results of operations
and the amount and timing of the resolution of such matters.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Financial Condition
- ---------------------------------------
Cash flow used in operating activities for the first quarter of fiscal 1996
was $62.8 million as compared to $69.1 million for the first quarter of 1995.
At February 29, 1996, GenCorp's total debt was $401 million, a decrease of
$2 million compared to $403 million at November 30, 1995. Proceeds from the
divestiture of the Vibration Control and Reinforced Plastics divisions totaled
$122 million, of which $80 million was received during the first quarter of 1996
and used to reduce bank borrowings. Divestiture proceeds received during the
quarter were offset by increased spending on working capital. Interest expense
in the quarter decreased to $8.0 million from $8.7 million in the comparable
period last year due to lower interest rates.
Material Changes in Results of Operations
- -----------------------------------------
Net sales in the first quarter of 1996 declined 14 percent to $368.3
million from $428.1 million in the first quarter of 1995. Sales from continuing
businesses totaled $321.0 million for the first quarter of 1996, compared to
$355.9 million during the first quarter of 1995. The sales decline was primarily
related to lower volumes at Aerojet, the Company's aerospace and defense
segment.
Segment operating profit declined to $7.4 million in the first quarter of
1996, from $22.5 million in the first quarter of 1995. Improved operating profit
at the polymer products segment and at Aerojet was offset by declines in
automotive operating profit and the loss on the businesses sold. Operating
profit from continuing businesses improved to $22.8 million for the first
quarter of 1996, compared to $21.5 million for the first quarter of 1995, after
adjusting for the sale of the Company's Reinforced Plastics, Vibration Control
and rigid plastics businesses. Operating margins from continuing businesses
increased to 7.1 percent in the first quarter of 1996, compared to 6.0 percent
for the first quarter of 1995. Earnings per share from continuing operations
totaled $.18 for the first quarter of 1996 compared to $.20 in the first quarter
of 1995.
On a consolidated basis, the Company reported a net loss of $(11.7) million
for the first quarter of 1996 compared to net income of $7.0 million in the
first quarter of 1995. During the first quarter of 1996, the divestitures of the
two automotive divisions, Vibration Control and Reinforced Plastics, resulted in
a pretax charge of $10.0 million. Also during the first quarter of 1996, the
Company took a pretax charge of $14.8 million for expenses related to the
Voluntary Early Retirement Incentive Program for eligible employees at the
Company's Fairlawn headquarters and Corporate Technology Center.
Divestitures of both the Vibration Control and Reinforced Plastics
divisions represented important steps in the Company's strategy to focus
resources on fewer businesses with higher potential for growth and value
creation. The two highest priorities in 1996 will be to continue the Company's
aggressive program for performance improvement across the Company and to move
forward with strategic initiatives for those businesses that it intends to grow.
Net sales for Aerojet in the first quarter of 1996 were $98.6 million, a
decrease of 24 percent compared to the first quarter of 1995. The decrease
reflects lower volume on the Defense Support Program (DSP) and lower sales of
Titan propulsion systems.
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<PAGE> 12
Material Changes in Results of Operations (continued)
- -----------------------------------------------------
Aerojet's segment operating profit for the first quarter of 1996 was $7.5
million compared to $7.3 million in the first quarter of 1995. Operating margins
increased to 7.6 percent during the first quarter of 1996 compared to 5.6
percent for the first quarter of 1995. Better contract performance, lower health
care expenses and productivity enhancement efforts led to the improved profit
and margins.
Aerojet's sales volume is expected to be higher throughout the remainder of
the year. In February, Aerojet received an award from the Air Force for DSP
Sensor 23. Aerojet received approval to begin production on the Joint Tactical
Air to Ground System (JTAGS), a tactical ballistic missile ground station
system. Also during the quarter, the Near Earth Asteroid Rendezvous (NEAR)
spacecraft was launched. NEAR, built around an Aerojet primary structure and
propulsion system, will be the first spacecraft to orbit a small planetary body,
the 433 Eros asteroid.
Net sales for the automotive business segment in the first quarter of 1996
decreased 13 percent to $143.4 million, compared to $164.8 million in the first
quarter of 1995, primarily due to lower volume on several key platforms and the
timing of the divestitures. Automotive sales from continuing operations totaled
$96.1 million in the first quarter of 1996 compared to $98.6 million in the
first quarter of 1995, a 2.5 percent decline primarily due to lower sales in
Europe.
The automotive segment had operating losses of $(11.6) million for the
first quarter of 1996, versus operating income of $6.2 million for the first
quarter of 1995, due to losses of $(5.4) million related to the operations of
businesses sold during the quarter and $(10.0) million related to the
divestitures. The Company's continuing automotive business earned $3.8 million
for the first quarter of 1996 compared to $5.5 million in the first quarter of
1995. Profit was impacted by development costs for the Automotive Occupant
Sensor (AOS) business.
During the quarter, the Vehicle Sealing Division received its first award
from Honda for production of glassruns on the 1998 Accord. The Company is
continuing to pursue new business opportunities with this important global
customer. The division was also awarded new business from Volkswagen for the
side window encapsulation on the EA-420 platform. The Company is also continuing
to evaluate business opportunities and structures for AOS.
Net sales for the polymer products business segment in the first quarter of
1996 decreased 5 percent to $126.3 million, compared to $133.1 million in the
first quarter of 1995. Sales in 1996, after adjusting for last year's revenues
from the divested rigid plastics business, were flat.
Segment operating profit for the polymer products businesses increased to
$11.5 million, compared to $8.7 million in the first quarter of 1995, after
adjusting for the divestiture of the rigid plastics business. Continued
productivity improvements and more stable raw material prices resulted in the
improved profits for the quarter.
During the 1996 first quarter, the Decorative Products group introduced
several new products including Rendura ST, a new vinyl laminate for the consumer
electronics market and GenFlex RM, a new PVC roofing membrane providing longer
life and ease of installation to roofing customers. Essex brands also introduced
Esscape, a unique breathable wallcovering designed for improved performance in
high humidity/mildew prone climates. Penn Racquet Sports has signed a new
contract with Pagoda International as the exclusive worldwide licensee for
development, marketing and sales of Penn branded footwear. Also Penn has
extended its strategic alliance with Head for an additional five years.
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<PAGE> 13
Environmental Matters
- ---------------------
GenCorp's policy is to conduct its businesses with due regard for the
preservation and protection of the environment. The Company devotes a
significant amount of resources and management attention to environmental
matters and actively manages its ongoing processes to comply with extensive
environmental laws and regulations. The Company is involved in the remediation
of environmental conditions which resulted from previously accepted
manufacturing and disposal practices that date back to the 1950s and 1960s at
certain of its plants. In addition, the Company has been designated a
potentially responsible party, with other companies, at sites undergoing
investigation and remediation.
The nature of environmental investigation and cleanup activities often
makes it difficult to determine the timing and amount of any estimated future
costs that may be required for remedial measures. However, the Company reviews
these matters and accrues for costs associated with the remediation of
environmental pollution when it becomes probable that a liability has been
incurred and its proportionate share of the amount can be reasonably estimated.
The Company's Condensed Consolidated Balance Sheet at February 29, 1996
reflects accruals of $264 million and amounts recoverable of $127 million from
third parties for remediation costs.
The effect of resolution of environmental matters on results of operations
cannot be predicted due to the uncertainty concerning both the amount and timing
of future expenditures and future results of operations. However, management
believes, on the basis of presently available information, that resolution of
these matters will not materially affect liquidity, capital resources or the
consolidated financial condition of the Company. The Company will continue its
efforts to mitigate past and future costs through pursuit of claims for
insurance coverage and continued investigation of new remediation alternatives
and associated technologies. For additional discussion of environmental
matters, refer to Note F - Contingencies.
-13-
<PAGE> 14
Part II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
- -------------------------
Information concerning legal proceedings, including proceedings relating
to environmental matters, which appears in Note F beginning on page 8 of this
report is incorporated herein by reference.
The Company and its subsidiaries are subject to various legal actions,
governmental investigations, and proceedings relating to a wide range of matters
in addition to those discussed above and in Part I of this report. In the
opinion of management, after reviewing such matters and consulting with the
Company's counsel, any liability which may ultimately be incurred with respect
to these additional matters will not materially affect the consolidated
financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
At the Company's Annual Meeting of Shareholders held on March 27, 1996,
holders of GenCorp Common Stock elected Charles A. Corry, William K. Hall, Dr.
Robert K. Jaedicke and Robert D. Kunisch as directors to serve a three year term
expiring in 1999. Shareholders also ratified the Board of Directors' appointment
of Ernst & Young LLP as the Company's independent auditors for 1996.
Following is the final result of the Common votes cast:
A) Election of Directors:
<TABLE>
<CAPTION>
Broker
For Withheld Nonvotes
--- -------- --------
<S> <C> <C> <C>
Charles A. Corry 30,012,331 548,771 -0-
-------------- ----------------- -------------
William K. Hall 30,023,238 537,864 -0-
-------------- ----------------- -------------
Dr. Robert K. Jaedicke 29,990,496 570,606 -0-
-------------- ----------------- -------------
Robert D. Kunisch 30,016,231 544,871 -0-
-------------- ----------------- -------------
</TABLE>
B) Ratification of the Board of Directors' appointment of Ernst & Young LLP as
independent auditors:
<TABLE>
<S> <C> <C> <C>
Broker
For: 30,194,176 Against: 204,362 Abstain: 180,378 Nonvotes: -0-
----------- -------- --------- -------
</TABLE>
-14-
<PAGE> 15
Item 5. Other Information
- -------------------------
On April 2, 1996 the Company announced that James K. Lambert had been
named Senior Vice President of Operations and Total Quality and elected an
officer of the Company.
On February 7, 1996 the Company announced an organizational realignment
which included a Voluntary Early Retirement Incentive Program for eligible
employees at its Fairlawn headquarters and its Corporate Technology Center and
the elimination of the Office of the Chief Executive. Concurrently with the
reorganization: (i) Roger I. Ramseier was elected Vice President; President of
Aerojet-General Corporation; (ii) Samuel W. Harmon was elected Senior Vice
President, Human Resources; (iii) Rosemary Younts was elected Senior Vice
President, Communications; and (iv) the following GenCorp officers announced
their retirement under the Voluntary Early Retirement Incentive Program: William
E. Bachman, Executive Vice President; Marvin L. Isles, Executive Vice President;
Charles R. Ennis, Senior Vice President, Law and Environmental Affairs; General
Counsel, and Dr. Russell A. Livigni, Vice President, Corporate Technology.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a) Exhibits
--------
<TABLE>
<CAPTION>
Table
Exhibit
Item No. Exhibit Description Number
------------------------------------------------------------------------------------------------
<S> <C> <C>
10 Asset Purchase Agreement dated March 1, 1996 among GenCorp Inc.,
Cambridge Industries Holdings, Inc. and Cambridge Industries, Inc.
was filed as Exhibit A to the Company's Current Report on Form 8-K
dated March 1, 1996 (File No. 1-1520) and is incorporated herein
by reference.
10 Asset Purchase Agreement dated February 14, 1996 between BTR
Antivibration Systems, Inc. and GenCorp Inc. was filed as Exhibit B
to the Company's Current Report on Form 8-K dated March 1, 1996
(File No. 1-1520) and is incorporated herein by reference.
11 Statement re computation of per share earnings. 11
27 Financial Data Schedule. 27
(Filed for EDGAR only)
</TABLE>
b) Reports on Form 8-K
-------------------
On March 15, 1996 the Company filed a Current Report on Form 8-K,
Date of Report (date of earliest event reported) March 1, 1996
reporting the sale of substantially all of the assets of its
Reinforced Plastics Division to Cambridge Industries, Inc. and the
previous sale of substantially all of the assets of its Vibration
Control Division to BTR Antivibration Systems, Inc., a subsidiary of
BTR plc.
-15-
<PAGE> 16
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENCORP INC.
Date April 11, 1996 By /s/ D. M. Steuert
--------------------------- ----------------------
D. M. Steuert, Senior Vice President
and Chief Financial Officer
Date April 11, 1996 By /s/ E. R. Dye
--------------------------- ------------------
E. R. Dye, Secretary
-16-
<PAGE> 1
EXHIBIT 11
GenCorp Inc.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Unaudited
Three Months Ended
-----------------------------
February 29, February 28,
1996 1995
------------ ------------
<S> <C> <C>
Earnings (Dollars in Millions)
- --------
Net Income (Loss) for Primary
Earnings Per Share $ (11.7) $ 7.0
Tax Affected Interest Expense
Applicable to 8% Convertible
Subordinated Debentures 1.4 1.4
---------- ----------
Net Income (Loss) for Fully Diluted
Earnings Per Share $ (10.3) $ 8.4
========== ==========
Shares (In Thousands)
- ------
Weighted Average Number of
Common Shares Outstanding
for Primary Earnings Per Share (see Note B) 33,670 32,259
Assuming Conversion of 8%
Convertible Subordinated
Debentures 7,158 7,158
---------- ----------
Weighted Average Number of
Common Shares Outstanding
for Fully Diluted Earnings Per Share 40,828 39,417
========== ==========
Earnings Per Share
- ------------------
Primary: $ (.35) $ .22
========== ==========
Fully Diluted: $ (.35) $ .21
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> FEB-29-1996
<CASH> 15,200
<SECURITIES> 7,500
<RECEIVABLES> 252,300
<ALLOWANCES> 0
<INVENTORY> 157,600
<CURRENT-ASSETS> 474,800
<PP&E> 1,095,300
<DEPRECIATION> 670,700
<TOTAL-ASSETS> 1,349,400
<CURRENT-LIABILITIES> 308,200
<BONDS> 115,000
<COMMON> 3,300
0
0
<OTHER-SE> 14,300
<TOTAL-LIABILITY-AND-EQUITY> 1,349,400
<SALES> 368,300
<TOTAL-REVENUES> 368,300
<CGS> 312,300
<TOTAL-COSTS> 382,200
<OTHER-EXPENSES> (1,600)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,000
<INCOME-PRETAX> (20,300)
<INCOME-TAX> (8,600)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,700)
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
